The clever way Netflix determines subscription rates in each country

History has shown that any effort aimed at eradicating piracy via brute force is destined to fail. Arguably, the only way to truly stem piracy is to, quite simply, embrace the notion that piracy exists and subsequently do everything in your power to deliver a product or service that’s fundamentally more appealing than scouring the depths of BitTorrent.

Apple successfully implemented this strategy when it introduced the iTunes Music Store, instantly making the digital download experience a much safer and simpler endeavor than acquiring music through illicit means.

In a similar vein, the way that Netflix sets up its pricing structure across different territories is quite brilliant. In setting up its pricing tiers in a specific country, Netflix takes into account the popularity of piracy within that region. Understanding that destroying piracy is an endless and perhaps fruitless battle (just look at the recent Game of Thrones leak, for example), Netflix instead views piracy as normal competition and adjusts its monthly price point accordingly.

During Netflix’s recent earnings conference call, Torrent Freak highlighted some choice remarks made by company CFO David Wells.

Wells articulated that piracy is a governing determinant in setting “our price in high piracy markets outside the U.S.”

In such countries with high piracy rates, Wells intimated that Netflix has to come in with a more affordable price point in order to compete and attract new users.

And so far, Netflix’s strategy, both on the pricing and content side of the equation, seems to be working exceedingly well.

Not only is Netflix doing well in countries with traditionally high piracy rates, its subscriber rate continues to trend upwards dramatically. As we reported last week, Netflix in the last quarter alone added 4.9 million new subscribers, a figure which is 20% higher than Wall Street analysts were expecting.

As a final point of interest, and going back to Netflix astutely using piracy to its advantage, Netflix executives have previously indicated that they’ll look at some of the more popular pirated shows in order to get a better grasp on which shows are worth purchasing and bringing into the Netflix umbrella.